Markup vs. Margin: A Contractor's Guide to Pricing Jobs
Most contractors lose money not because their crews are slow, but because they confuse markup with profit margin. Here's the difference — with the formulas and a conversion table you can actually use on your next bid.
The short version
- Markup is how much you add to your costs.
- Margin is how much profit you keep out of the sale price.
- A 20% markup is not a 20% profit margin. It's a 16.7% margin.
The formulas
Markup = (Price − Cost) ÷ Cost
Margin = (Price − Cost) ÷ Price
A worked example
You're bidding a bathroom remodel. Your true job cost — materials, labor, subs, dump fees, permits, and your share of overhead allocated to the job — is $20,000.
You add a 20% markup, so you bill the client $20,000 × 1.20 = $24,000.
Your profit is $4,000. But what's your margin?
$4,000 ÷ $24,000 = 16.7%, not 20%.
If you actually want a 20% profit margin on that same $20,000 job, you need to bill $25,000 — a 25% markup. That's a $1,000 difference on a single job, and it compounds across every project you run.
Markup → margin conversion table
| Markup on cost | Actual profit margin |
|---|---|
| 10% | 9.1% |
| 15% | 13.0% |
| 20% | 16.7% |
| 25% | 20.0% |
| 30% | 23.1% |
| 35% | 25.9% |
| 40% | 28.6% |
| 50% | 33.3% |
| 67% | 40.0% |
| 100% | 50.0% |
Why this matters for construction
Construction is a low-margin business with lumpy costs. A change order gets missed, lumber goes up 8% mid-job, a sub no-shows and you eat overtime — and the "20% profit" you quoted is gone. Pricing in markup and reporting in margin is one of the most common reasons contractors finish a busy year with nothing in the bank.
How to price the right number
- Know your true job cost. Materials, labor (with burden), subs, equipment, permits, dumpsters — and a fair share of your overhead.
- Decide the margin you want to keep, not the markup. Most healthy remodelers target 25–40% gross margin.
- Convert margin to markup, then apply it. Formula:
Markup = Margin ÷ (1 − Margin). So a 30% margin = a 42.9% markup. - Track actuals against the bid. If you don't measure cost vs. price by job, you'll never know which crews, project types, or clients are actually paying you.
How SiteView handles this
SiteView keeps both numbers visible on every estimate and job. When you build an estimate, you set the markup or the target margin and the other side updates automatically — so you stop guessing whether "20%" means 20% added or 20% kept. Project costing then tracks actual costs against the bid in real time, so a job that's drifting below your target margin shows up before it's too late to fix.
Ready to price jobs with confidence?
Try SiteView with your own numbers — estimates, project costing, and real-time job profit on every project.